CASH AND CASH EQUIVALENTS

INTERMEDIATE ACCOUNTING I

CASH  Company may receive a check from its

customer for settling the credit purchase
that the customer made previously.
Cash includes money and other negotiable
 Not yet deposited so it is Cash on Hand.
instrument that is payable in money and acceptable
Undeposited cash collections
by the bank for deposit and immediate credit.
 Bills and currencies not yet deposited.
Traveler’s check
 Presented in the SFP as Current Asset
 Used by people on vacation in foreign
 Measured at Face Value
countries and can be used to buy goods or
 Includes:
services or be exchanged for cash.
1. Cash on Hand
o Ginagamit ng tourists para hindi
2. Cash in Bank
hassle
3. Cash Fund (set aside for current
Postal money orders
purpose)
 Is in the form of certificate commonly
issued by the government or banking
Take Note!
institution that allows the stated payee to
 Cash is money or its equivalent that is
receive cash on demand.
readily available for unrestricted use.
Bank drafts
o Pwede gamitin kahit saan
 For large purchases.
o If restricted, not part of Cash
Checks received from customers
 Cash also includes checks, bank drafts and 1. Personal checks
money orders. o Customer to company (direct)
o Acceptable by bank for deposit
o Commonly used in everyday
or immediate encashment
business
 If check is post-dated, not considered as o Disadvantage is pwede
cash.
tumalbog yung check if there is
o Future-dated checks; need
no sufficient fund sa account ni
muna mag-mature (maturity customer
date) to be valuable 2. Certified checks
o There is a verification process to
Cash on Hand
check if may sufficient fund
 Nasa loob ng company.
yung customer
o If ‘certified/accepted,’ there is a
C Customer’s checks awaiting deposit
sufficient fund in the customer’s
U Undeposited cash collections (currencies
bank account
such as bills and coins)
T Traveler’s check o Secured
C Cashier’s/Official/Treasurer’s/Manager’s 3. Cashier’s/Manager’s
checks o Customer to bank to company
Mo Postal money orders o Approved by cashier/manager
Ba Bank drafts 4. Traveler’s checks
o Used by people on vacation in
foreign countries and can be
used to buy goods or services or
be exchanged for cash.
Customer’s checks awaiting deposit

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CASH AND CASH EQUIVALENTS
INTERMEDIATE ACCOUNTING I
 Ginagamit ng tourists
para hindi hassle S Sinking fund Noncurrent Investment; if
Cash in Bank related bonds payable is
current, included in Cash
 Pera ng company na nasa loob ng bank.

Take Note!
a. Current account/checking account/demand
deposit/commercial deposit  Classification of cash fund as Current or
 Withdrawable by checks Noncurrent should be parallel to the
b. Savings deposit (Savings account – SA) related liability.
 Withdrawable by ATM o Entity should reclassify NCA if
related liability becomes current
Savings deposit
 Banks issues ATM/passbook to depositors. Types of Checks
1. Undelivered checks
Demand deposit o For payables, already deducted
 Banks issues checks to depositors. from Cash in Bank but not yet
o Checks can be deposited or delivered
encashed o @ year end, cash pa rin siya ng
company so revert back to cash:
Cash Fund for Current Purposes Entry:
Cash in Bank xx
C Change fund A/P xx
P Payroll fund 2. Postdated checks
Purchasing fund o For payables, nasa customer na
R Revolving fund pero hindi pa pwede i-encash so
Int Interest fund revert back to cash:
Pe Petty Cash Fund Entry:
Di Dividend fund Cash in Bank xx
T Travel fund
A/P xx
Tax fund
o For receivables, nasa company
pero hindi pa pwede i-encash so
Fund for Noncurrent Operations revert back to A/R:
 Part of Noncurrent Assets, not cash. Entry:
A/R xx
P Pension fund Noncurrent Investment; if Cash in Bank xx
related liability is current, 3. Stale checks
included in Cash
o Checks not encashed by payee
Preferred Noncurrent Investment, unless
redemption fund it has a mandatory redemption
within 6 months from its date
and if redeemable
 Within one year – current
 Within three months –
current
A Acquisition of Noncurrent even if expected to Take Note!
PPE be disbursed next year
 Bank overdraft is the negative balance in
C Contingent fund Noncurrent Investment
the bank account.
I Insurance fund Noncurrent Investment

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CASH AND CASH EQUIVALENTS
INTERMEDIATE ACCOUNTING I
o If different banks, Current 2. 1/1/26 – Investment, Current Asset
Liability 3. 10/1/26 – Cash Equivalents
o If same banks, offset against
positive amount Time Deposit
 Cash can be withdrawn upon maturity
date.
CASH EQUIVALENTS
o Terms are 30, 60, 90, 180, 360…
 Interest is higher compared to Savings
Cash Equivalents are short-term and highly liquid Deposit and Demand Deposit.
investments that are readily convertible into cash.  It qualifies as Cash Equivalent if term is 30,
60, or 90 days only.
 It is debt instruments acquired three Money Market Placement
months or less before maturity date.  Dumadaan muna sa Mutual Fund/UITF
o Only debt instruments are before mag-invest sa debt instruments
qualified to be a cash (indirect).
equivalent, not equity o They are investment
instruments professionals
 EI has no maturity  It earns interest
date Commercial Paper
 Used by large corporations.
Treasury Bills  Issued by private entities.
 Government issues Treasury Bills (T-Bills)
to investors to fund public projects. If above items are: Treatment
o They pay interest income (debt 1. Originally invested/acquired
instrument) to investors for more than three months
 Issued by Bureau of the Treasury before maturity date,
 90 days or less remaining term is:
a. Three months or less
Treasury Notes
b. More than three months
 Issued by Bureau of the Treasury Short-term
but within one year
 1 to 10 years Short-term
c. More than one year
Treasury Bonds
 10 years or more Long-term
2. Originally invested/acquired Cash Equivalents
Take Note! for three months or less
before maturity date
 Treasury notes and bonds can be Cash
Equivalents if acquired three months or
Take Note!
less before maturity date.
 If the problem is silent:
1. Treasury notes and bonds – NCA
Example:
2. Cash in money market account – CE
3. Time deposit – CE
4. Compensating balance – not legally
restricted
If it is acquired:
1. 1/1/25 – Investment, Noncurrent Asset
PETTY CASH FUND

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CASH AND CASH EQUIVALENTS
INTERMEDIATE ACCOUNTING I
Whenever the PCF runs low, a check is
Petty Cash Fund is money set aside to pay small drawn to replenish the fund; usually equal
expenses which cannot be paid conveniently by to petty cash disbursements.
means of check. Expenses xx
Cash in Bank xx
 PCF may be accounted for using two d. To adjust unreplenished expenses.
methods: At the end of accounting period, it is
1. Imprest Fund System necessary to state the correct petty cash
2. Fluctuating Fund System balance.
Expenses xx
Take Note! Petty Cash Fund xx
 PCF is established because may mga e. Increase in the fund.
transactions na impractical kung checks Petty Cash Fund xx
ang ipambabayad. Cash in Bank xx
o Transportation expenses f. Decrease in the fund.
 PCF is included under ‘cash fund for Cash in Bank xx
current purposes.’ Petty Cash Fund xx
 The one who manages the PCF is the petty g. Cash shortage.
cash custodian. Cash Shortage xx
Cash in Bank xx
h. Cash overage.
IMPREST FUND SYSTEM
Cash in Bank xx
Cash Overage xx
Imprest Fund System is a system of control of cash
which requires:
1. Cash Receipts -> deposited intact in the bank
FLUCTUATING FUND SYSTEM
2. Cash Disbursements -> made by means of
check
It is called Fluctuating Fund System because the
Take Note! checks drawn to replenish the fund do not
 Imprest Fund System minimizes the cash necessarily equal the petty cash disbursements.
on hand of the entity.
 Disbursements are recorded upon the  The replenishment checks are drawn upon
replenishment of the fund. the request of the petty cashier.
o Iniipon muna lahat ng expenses
Take Note!
Journal Entries  In the Fluctuating Fund System, cash
a. A check is drawn to establish the fund. disbursements are immediately recorded,
Petty Cash Fund xx resulting in a fluctuating petty cash
Cash in Bank xx balance per book from time to time.
b. Payment of expenses out of the fund. o Continuous yung record ng
Memo Entry in Petty Cash Journal expenses

c. Replenishment of petty cash payments. Journal Entries

a. Establishment of the fund.

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CASH AND CASH EQUIVALENTS
INTERMEDIATE ACCOUNTING I
Petty Cash Fund xx
Cash in Bank xx
b. Payment of expenses out of the fund.
Under this system, the disbursements
from the PCF are immediately recorded.
Expenses xx
Petty Cash Fund xx
c. Replenishment or increase in the fund.
The replenishment check may or may not
be the same as the petty cash
disbursements.
Petty Cash Fund xx
Cash in Bank xx
d. To adjust unreplenished expenses.
At the end of reporting period, no
adjustment is necessary because the petty
cash expenses are recorded outright.
e. Decrease in the fund.
Cash in Bank xx
Petty Cash Fund xx
f. Cash shortage.
Cash Shortage xx
Petty Cash Fund xx
g. Cash overage.
Petty Cash Fund xx
Cash Overage xx